EU moves closer to climate deal for heavy industry[fr][de] 

The Environment Council meeting, after which ministers will publish conclusions on 'global mercury challenges' and on sustainable consumption and production (SCP), is being overshadowed by high-politics discussions on the climate and energy package, which has been transferred to head-of-state level due to the politically sensitive nature of the proposed CO2 reduction measures.

Among the remaining 'sticking points' of the package is the treatment of the EU's heavy industries like cement, steel, aluminium and chemicals. Representatives of these sectors argue that the EU's Emissions Trading Scheme (EU ETS) would increase operating costs, mainly from higher electricity prices, to such an extent that operators would be forced to move their factories, jobs and emissions beyond the EU's borders, leading to a 'leakage' of carbon or CO2.

To address these concerns, heads of state are likely to agree a set of criteria to identify sectors at high risk of carbon leakage. Industries that meet the criteria could then qualify for free emissions rights after 2013. A specific list of sectors will be published in 2010, following the conclusion in Copenhagen in December 2009 of UN-led talks to agree upon an international climate change deal, a French EU Presidency spokesperson told journalists in Brussels yesterday (3 December).

The leakage criteria under discussion are 'evidence based' and draw on data and studies provided by the European Commission, according to Paris. In the impact assessment accompanying its climate and energy proposals, tabled on 23 January, Brussels identified the use of free emissions rights for select industries as "a very powerful tool to offset carbon leakage and adverse effects on energy-intensive industries".

But despite such tacit support for the use of free pollution rights, the Commission's original proposal calls for the limited use and gradual phasing-out of such rights between 2013 and 2020. Environmental NGOs and Green MEPs like the UK's Caroline Lucas are concerned that the criteria currently on the table are too inclusive, and will allow nearly all of the EU's energy-intensive industries to receive free emissions allowances indefinitely, effectively taking the backbone out of the EU ETS.

There are also concerns that granting too many free permits would send the 'wrong' signal to countries like China and the US, whose delegates are currently attending a 12-day UN climate conference in Poznan, Poland along with representatives of over 180 other nations. 

"Effectively subsidising so much of our industry would be not only a real blow to the effectiveness of the ETS, but a terrible precedent to set from a global perspective - bearing in mind the huge proportion of emissions growth that is set to come from energy-intensive industry," Lucas said in a 3 December statement.

Beyond carbon leakage discussions, EU countries are also expected to lock horns over the issue of CO2 permit allocation or subsidies for the bloc's power sector. Poland, which is up to 90% dependent on coal for power generation, is concerned that the package would lead to an increase in electricity prices of more than 80%. Warsaw wants other member states to agree to a scheme whereby countries that use coal for a significant proportion of their energy mix would be allowed to grant free emission rights or state subsidies to their power sectors for a limited period in order to hold back price hikes.

The issues will come to a head when member states convene in Brussels for the next EU summit on 11 and 12 December. A deal at the summit is increasingly likely, according to sources close to the talks, and few observers expect the European Parliament to reject any agreement during its 17 December plenary vote, despite earlier threats by the EU's co-legislator to throw out a watered-down compromise on the package.